BIRMINGHAM, Alabama -- A bank representing Jefferson County debt holders and lawyers who successfully challenged the county's 2009 occupational tax have filed their proposed questions to ask the Alabama Supreme Court about the county's right to seek bankruptcy protection.
The submissions were requested by U.S. Bankruptcy Judge Thomas Bennett, as creditors seek to block Jefferson County's Chapter 9 bankruptcy filing over its $4.23 billion in debts, including $3.14 billion for a court-ordered sewer rehabilitation program.
The creditors contend Jefferson County does not have the right under Alabama law to file for bankruptcy, because it did not have any outstanding bond debt. The county has amassed its debt through bond-like debt instruments called warrants.
But the county contends it can legitimately seek Chapter 9 protection because it had issued bonds in the past and commissioners approved a resolution in July contemplating the need for future bond sales.
The lawyers want the bankruptcy judge to ask the Alabama Supreme Court if the county must have outstanding bond debt to file bankruptcy, and what effect past county bond sales or commissioners' stated future plans to sell bonds would have on the county's right to seek protection from creditors.
In a hearing earlier this month, Bennett said he had not decided if he would submit questions to the Alabama Supreme Court on its interpretation of the state government bankruptcy law. Wednesday was the deadline for lawyers to file their proposed questions to the bankruptcy judge.
The state high court currently is considering a similar issue regarding a bankruptcy petition filed by the south Alabama town of Prichard. A bankruptcy judge rejected Prichard's petition because it had outstanding warrant debt but no bond debt, and the town filed an appeal to the state Supreme Court.
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